State policies were aggravating the challenge of high unemployment, setting unsustainable wage minimums and stifling true entrepreneurialism in the country’s labour-intensive clothing manufacturing sector, Centre for Development and Enterprise (CDE) executive director Ann Bernstein told members of the media on Tuesday.

Speaking at the launch of a new CDE publication, 'Job Destruction In The South African Clothing Industry', Bernstein asserted that its findings were a stark indictment of the current approach to collective bargaining by the State.

Bargaining council agreements that were extended to nonparties had resulted in job losses, added report co-author Professor Nicoli Nattrass.

“The imposition of a minimum wage – suitable for high-wage firms at the top-end of the industry – resulted in the closure and export of low-wage manufacturing operations. This is a direct result of an alliance between the State, organised labour and larger firms in the clothing sector,” she said.

Some 70% of local clothing manufacturers in the lower-wage clothing sector could not afford to pay their employees the minimum wage and would have to close, the CDE reported.

Further, Nattrass noted that raising minimum wages in labour-intensive industries that compete against firms in low-wage countries, such as China and Lesotho, would affect already-constricted profit margins.

Bernstein added that government’s commitment to the International Labour Organisation’s decent work agenda – which espoused opportunities for work that would deliver a fair income, equal opportunity and personal freedoms – was preventing the country from dealing with the challenges of mass unemployment.

“The decent work agenda involves the imposition of labour and industrial policies that makes labour-intensive production, particularly in the clothing production industry, almost impossible,” said Bernstein.

The report alleged that government’s approach to economic growth, which focused on high wages and high-technology manufacturing, was in contrast with the reality of existing market conditions, in which the majority of the workforce was unskilled.

“The current approach to growth simply ignores the fact that millions of South African workers who desperately need employment would be unable to operate in such an environment,” Bernstein warned.

She advocated that South Africa adopt a more differentiated approach to wage-setting that enforced basic standards of employment, but tolerated low-wage employment coupled with productivity-linked pay.

“We need a regulatory framework that is fair for all workers and that encourages investment, creates jobs and expands the skills base,” said Bernstein.

Noting that wages and production costs were rising in China, she added that South Africa should capitalise on the opportunity to expand local manufacturing capabilities to compete for investment moving out of the region.

“If the country is serious about increasing employment, we must stop destroying jobs and deal with the contradictions in current policy,” she concluded.